Week in Review, Feb. 27

The stock market managed another gain during the holiday shortened trading week. The S&P 500 rose +0.3% last week and has produced a total return of +8.96% YTD. Bonds were mostly unchanged for the week, with the longer end of the curve falling 3 to 5 basis points. The ten year Treasury closed the week back below 2% at a 1.98% yield.

There was a limited amount of economic data last week, with good news continuing to come from the housing market. The rate of existing home sales continued its upward trend, albeit at a slow pace. Sales in January were +4.3% higher than December and +0.7% higher than a year ago. Perhaps the best news was that inventories may finally be coming down. There is approximately a 6 month supply of homes on the market given current sales rates, the lowest amount in 6 years. Distressed properties continue to account for a large portion of sales (about one third) and 25% of home purchases in January were made by investors.

Tensions with Iran continued to drive the price of oil higher. Oil for delivery in Cushing, OK (WTI) closed at $109.49 per barrel, up over $6 for the week. Alaskan oil, which is delivered on the west coast, closed the week at $127.99 per barrel. While high oil prices are an increased drag on an already sluggish global economy, the State of Alaska is projected to have a $3.7 billion surplus in fiscal year 2013.

There is a fair amount of economic data scheduled to be released this week. Durable goods, Case-Shiller Housing Price Index, and consumer confidence is out on Tuesday. Wednesday should give us a reaffirmation to the fourth quarter GDP number (expected to be unchanged at +2.8%). Thursday has personal income and the ISM Manufacturing Index. Typically payroll numbers would be out this Friday; however the Bureau of Labor Statistics has delayed February numbers for one week until March 9th.

Wednesday is in fact February 29th, as 2012 is a leap year. We have an extra day every four years to make up for the fact that it takes the Earth 365 days and about 6 hours to complete a full lap around the sun.

Nicholas Case

Investment Analyst